Inspired entrepreneurs may not realize how important funding is to the success of a startup or small business venture. According to the Small Business Association, the second reason business fail is due to “inadequate or ill-timed financing.” Issues with cash flow can make it hard for a business to stay in the game long enough to take advantage of a future opportunity.

No startup owner wants to shut their doors because they failed to take into account operating expenses or the realistic costs of running a business. It is necessary for any startup to determine how much funding they will need to achieve short-term and long-term goals, how they will use the funds and what they may need to do in order to secure a loan or provide investors with an attractive return.

Understand a few of the options available for entrepreneurs and startups who need financing today.

Business Financing

Depending on the situation, it may be better to secure either debt financing or equity financing. Debt financing allows for individuals to cover the costs of specific needs and often comes in the form of bank loans that will need to be paid back within a certain time frame and at a given interest rate. There are debt financing options outside of bank loans, but this continues to be a funding alternative for startup owners.

On the other hand, there is equity financing. In this situation, a startup trades part of the ownership of a company in order to receive cash from investors. Risk is shared and startup owners have less to lose if a company fails and investors have more to gain if the venture is a success. Make sure that long-term goals of all major parties are in alignment when partnering with investors as they are often highly involved in the company.

Approaching Family and Friends

This may be one of the easiest ways to get money for funding. However, put a plan in place and create a legal documents to spell out the terms of an agreement to safeguard the interests of everyone involved. Formal documents and a business plan can help keep financing agreements professional and may be used when looking for other sources of financing.

Bank Loans or Private Lending

When applicants are not approved for a bank loan, they may want to investigate private lending. This alternative asks for similar information as a bank but they may be more willing to approve applicants for a higher-risk loan. In addition, such lenders generally have more knowledge about the industry.

Angel Investors

Those looking for relatively small amounts of capital may seek out the attention of angel investors. Venture capitalists are generally looking to invest $1 million or more. Angel investors can provide an infusion of a smaller amount of capital to a startup or small business.

Plan for Growth

How much money is needed to start and maintain the startup? Can it be operated on a lean budget and what funds will be needed once it takes off? A business plan and assessment of expenditures related to operating expenses, salaries and marketing efforts can help startup owners get a better understanding of the financing they will need to open and grow their business. Some research finds that premature scaling can lead to startup death. Staying lean may be a pragmatic approach to take until significant funding is secured from lenders and there is a need to expand operations.

Small businesses rely on networks of people to sell their products and services. By building a relationship with other people in your community, you can attract people to your small business, increase your profits and build up your business’s reputation. Of course, many people don’t know how to network, or if they do know how to network, they only know a few ways it can be done. These tips will help you build a network within your community.

Networking Can Happen Anywhere

Networking can happen inside and outside business hours, on lunch breaks, in lines and during random, everyday encounters. Get used to striking up conversations with strangers. If you’re able to mention your business during your conversations, all the better. Find creative ways to mention what you do, where you do it and who your customers are. The more people that know about you, the better.

You’ll Need an Elevator Pitch

An elevator pitch is a 30 second pitch that you can use to grab someone’s attention on the go. Your elevator pitch should inform people who want to know about the most important aspects of your business. Practice your elevator pitch many times until you can repeat it more or less from memory. If you produce a product, have pictures of your product always ready on your smart phone to be shared with anyone who is hearing your elevator pitch.

Your elevator pitch should be around 80 or 90 words, and should include a call to action at the end. What are you hoping to get out of your elevator pitch? Contact information? An appointment? A promise to call? Whatever it is that you’re trying to get from your pitch should be included at the end of the speech.

Carry Business Cards

Always have business cards on hand to hand out to people who you meet and people who solicit your information. Keep your business cards up to date with your title, cell phone number and office phone number. If your business card wasn’t designed by a professional, consider having it redesigned with your logo prominently displayed on the front of the card.

Become Active In the Community

People like to support businesses that support their community. Give back to the community by sponsoring events at local fairs and get-togethers. Attend town hall meetings in case something comes up that will affect your business personally. Donate money to local charities and participate in fund raisers for local groups like the band or social clubs.

Becoming active helps get your name out in the community. The more people have heard of your business, the more likely they are to stop in and buy products when they see your business location in the community. If your community has a local business owner’s association, consider joining. Not only will you have the chance to network while you’re participating in the group, but you’ll also get the added benefit of meeting other business owners who will also want to discuss what it’s like to own a business.

Keep At It!

Networking is something that most people get better at over time. Keep practicing while you’re out in the community to ensure that your business name is out there among your fellow citizens and peers.

While no two businesses are alike, they all follow certain guidelines when it comes to getting them up and running. A new startup is going to come with more than a few uncertainties no matter how well a person prepares, but preparation will still play a major role when it comes to success. Use this checklist as a way to address the biggest hurdles that need to be overcome.

Name and Plan

Companies can be either a sole proprietorship, partnership, Limited Liability Company (LLC), or an S-Corp. From there, choose a valid name and website domain to establish a presence for the company. Complete a business plan as soon as possible and ensure it lists the following information:

The mission of the company

How income is generated

Who the ideal customers are

Why the company has a competitive edge

Starting resources/necessary funding

Tax IDs, Permits, and Bank Accounts

Business owners should obtain a Federal Employer Identification Number from the IRS based on the type of business they are (e.g., LLC, S-Corp, etc.) This number is used to officially establish a payroll. Companies will also need an official commercial bank account as well, which may be tricky to open. Some banks are notoriously lax about their requirements while others may need more specific information, such as company minutes, signatures, and notarized financial information.

The next step is to obtain either a federal or a state permit. These permits are required based on the type of business and the rules of the state. A gun dealership will need a federal permit while an insurance company may or may not need a state permit. If owners sell physical goods and live in a state with sale’s tax, they’ll need to obtain a Resale or State Seller’s Permit.

Licenses, Insurance, and Accounting

A business license isn’t typically governed at the state level but at the county or city level. Even the most basic of home-based businesses may need a license stating the owner has permission to conduct official affairs. Owners may further have to register with a State Agency to hire part- or full-time workers. Owners may need general business insurance, including workers’ compensation, to protect themselves against major liability claims.

Most insurance agencies can make recommendations based on the most likely threats against the owner’s industry. Finally, set up a record-keeping system that will make auditing financial details easier, as well as keep track of where income is going. Small businesses may want to start with general software like QuickBooks to keep records simple.

Tie Loose Ends Together

Preparing means having all the tools in place to do everything from pay employees to ensure permits are renewed on time. Owners can either delegate these tasks or design a system that ensures nothing slips through the cracks. Once owners have taken care of this minutiae, they can start focusing on how to distinguish their company from their competitors. Establishing a brand is the precursor to deciding on a market strategy. Once an owner has the right angle, they can decide if their business will benefit more from traditional advertising or if they need to expand to social media, GoogleAds, etc.

Each checklist will vary based on who is opening the company, what they’re planning to do, and how they plan to secure the necessary permissions. However, this list should be able to give everyone an idea of what needs to get done before launching their official enterprise.

Small businesses rely on networks of people to sell their products and services. By building a relationship with other people in your community, you can attract people to your small business, increase your profits and build up your business’s reputation. Of course, many people don’t know how to network, or if they do know how to network, they only know a few ways it can be done. These tips will help you build a network within your community.

Networking Can Happen Anywhere

Networking can happen inside and outside business hours, on lunch breaks, in lines and during random, everyday encounters. Get used to striking up conversations with strangers. If you’re able to mention your business during your conversations, all the better. Find creative ways to mention what you do, where you do it and who your customers are. The more people that know about you, the better.

You’ll Need an Elevator Pitch

An elevator pitch is a 30 second pitch that you can use to grab someone’s attention on the go. Your elevator pitch should inform people who want to know about the most important aspects of your business. Practice your elevator pitch many times until you can repeat it more or less from memory. If you produce a product, have pictures of your product always ready on your smart phone to be shared with anyone who is hearing your elevator pitch.

Your elevator pitch should be around 80 or 90 words, and should include a call to action at the end. What are you hoping to get out of your elevator pitch? Contact information? An appointment? A promise to call? Whatever it is that you’re trying to get from your pitch should be included at the end of the speech.

Carry Business Cards

Always have business cards on hand to hand out to people who you meet and people who solicit your information. Keep your business cards up to date with your title, cell phone number and office phone number. If your business card wasn’t designed by a professional, consider having it redesigned with your logo prominently displayed on the front of the card.

Become Active In the Community

People like to support businesses that support their community. Give back to the community by sponsoring events at local fairs and get-togethers. Attend town hall meetings in case something comes up that will affect your business personally. Donate money to local charities and participate in fund raisers for local groups like the band or social clubs.

Becoming active helps get your name out in the community. The more people have heard of your business, the more likely they are to stop in and buy products when they see your business location in the community. If your community has a local business owner’s association, consider joining. Not only will you have the chance to network while you’re participating in the group, but you’ll also get the added benefit of meeting other business owners who will also want to discuss what it’s like to own a business.

Keep At It!

Networking is something that most people get better at over time. Keep practicing while you’re out in the community to ensure that your business name is out there among your fellow citizens and peers.

Entrepreneurs:

Every community wants to grow its local economy and achieve greater prosperity. Every community desires to be a location where people want to live, engage in meaningful work, and pursue their passions. In short, every community wants to be a vibrant, safe, and livable place.

A growing body of research has revealed that the traditional economic development emphasis on recruiting or attracting businesses is no longer sufficient to grow economies in most localities. A new model has emerged in theory and practice: supporting local entrepreneurs as an economic development strategy.

Programs such as “economic gardening,” pioneered by the City of Littleton, Colorado; Energizing Entrepreneurship institutes; business retention and expansion programs; and Hometown Competitiveness all focus on helping local entrepreneurs become more successful and bring more wealth into the local economy.

Our definition of an entrepreneur is “someone who perceives an opportunity and creates and grows an organization to pursue it.” In our view, entrepreneurship encompasses not only high-tech enterprises seeking venture capital, but small business owners pursuing their passion to create a manufacturing, retail, or service business, or to start a nonprofit endeavour.

Our mission at Growing Local Economies is to help local communities become more prosperous by leveraging their assets to support local entrepreneurs. We can help you find the best solutions for your community by working with you to identify the local assets, potential partners, and technical resources needed to create and sustain an entrepreneurial support initiative.